Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Want to start a business in Texas? Great thinking. With the second largest economy in the country and a low tax burden, the Lone Star State offers promising opportunities to small business owners. We created this step-by-step guide to starting a Texas business to help you become your own boss, from business idea to incorporation.
Start Operating in Texas: Key Points
Texas is one of the best places to start a business, with small businesses making up 99.8% of all businesses in the state.[1]
You can operate your business as a sole proprietorship, a limited liability company, a corporation, or a nonprofit.
You must obtain appropriate business licenses and file taxes on time to keep your small business compliant.
Easily start your business and remain compliant with our all-in-one tools, guiding you well past the initial setup with the right support and documents.
Ready to Start a Texas Business?
Setting up a business in Texas doesn’t have to be complicated. You can form a small business in Texas even as a new entrepreneur. Yet, it’s important not to jump blindly into the incorporation process. You’ll make many important decisions as an aspiring business owner, so spend time researching.
We’re here to support you. To help you start operating in Texas quickly, we broke the incorporation process down into eight straightforward steps.
1. Choose a Business Idea
Every new business starts with a good idea. Some entrepreneurs know what they want to do right away, but it’s normal if coming up with a business idea that genuinely excites you takes time. Here are some tips on developing a business idea for your Texas business.
Assess your skills and interests. What are you passionate about? Brainstorm how to turn things you’re good at into a profitable business. Almost anything is possible. For example, maybe you’re good with your hands and want to break into the booming trade industry in Texas.
Research the state economy. The products and services you’re going to sell should be in demand. Texas is a great business location with lots of opportunities. Some of the top industries in Texas are energy, manufacturing, and creative services, such as video game production.[2]
Brainstorm how you can make an impact. A successful small business can make a big difference in the lives of your community. Think about modern-day issues you care about and how you can contribute to solving them. Check out these green small business ideas if you're short on inspiration.
When starting a business in Texas, the sky’s the limit. Whether you’re embarking on the adventure of running your own business after working a 9-5 job or as a recent college grad, there are plenty of opportunities.
→ If you’re still short on inspiration, try doing one of these thirteen things.
2. Draft a Texas Business Plan
Every new business needs a well-thought-out business plan to bring your business idea to life. It’s a comprehensive document articulating your startup’s goals and how you will achieve them. Once you start operating in Texas, you can use your business plan to make decisions and help you secure funding.
The U.S. Small Business Administration (SBA) has compiled downloadable business plan templates that you can use. There’s no right or wrong way to write a business plan, but you may consider including the following sections in yours:
Executive summary: a brief overview of your mission statement and the most critical information about your products or services, target audience, and other crucial matters.
Market analysis: a research summary of target audience and industry trends and an analysis of your competitors and how your business will stand out.
Company organization: a description of how your company will be structured and an explanation of who will be responsible for what (if you’re hiring any employees or have business partners).
Services or products: an in-depth overview of the products or services you’re going to be selling, their main features, and benefits.
Financial plan: if you don’t need funding, this section can be simple revenue and expense projections for internal use. If you are applying for funding, include as much information about your company's financial outlook as possible.
Marketing plan: businesses typically use different channels to market their products or services.
Appendix: you can use this section to keep important documents like product pictures, patents, and business licenses in one place for easy reference.
It’s essential to draft a business plan before you start the business formation process. Without a business plan, making effective business decisions will be challenging because they’ll be based on guesswork instead of research. As a result, starting a business in Texas without a business plan can result in costly mistakes.
3. Select a Business Name
Deciding on your business name is essential in the business formation process. Your business name should be memorable and reflect your business idea. It’s likely the first thing your target audience will learn about your business, so make it stand out.
Aside from a few state restrictions, you have almost complete control over your business name. The Texas Secretary of State has created a comprehensive business resource on entity name restrictions. Some of the most important ones include:
Your business name can’t falsely imply government association (for example, you can’t name your business “FBI.”)
You can’t use certain restricted words in your business name, such as “Spanish,” “College,” and “bank.”
You can’t use offensive or vulgar language in your business name.
Your business name must be “distinguishable in the records” from any other business entity names already registered with the Secretary of State.[3]
It’s essential to ensure that your business name is available before you file the paperwork to start a business in Texas. Your application will get rejected if you submit business formation documents with a business name already in use.
You can do a paid Texas business search on the Secretary of State’s website or use Swyft Filings’ Free Business Name Search tool to check name availability. Once you find a business name you like, you can make a name reservation with the Secretary of State for a $40 filing fee.
4. Choose a Business Structure
Your business structure determines how your business will be taxed and whether you’ll have personal liability protection, so it’s essential to research your options before business formation. Here’s a rundown of the business structures you can choose for your business.
Sole Proprietorship
A sole proprietorship is the default business structure and doesn’t require incorporation. It’s the easiest way to start a business in Texas because it’s simply one individual engaging in business without a formal structure. As a sole proprietor, you’ll report your business income on your tax return, and your business won’t be taxed separately.
Many businesses start as sole proprietorships, but a significant downside to being a sole proprietor is that you don’t have any personal liability protection. As a sole proprietor, your assets and business assets are the same. If your business has debts or faces litigation, your personal property, such as your house or car, is potentially at risk.
Some sole proprietors apply for a DBA, also known as an assumed name certificate or “doing business as.” You need a DBA to operate your sole proprietorship under a name that’s not your legal name. Most banks require you to have a DBA to open a business bank account if you’re a sole proprietor.
Limited Liability Company (LLC)
A limited liability company is a flexible legal structure that provides liability protection to its owners. It’s one of the best business structures for small businesses because it protects your personal assets but is easier to manage than a corporation. You can report your business income as an LLC owner on your personal tax return. Learn more about forming an LLC here.
Corporation
A corporation is a complex business structure characterized by personal liability protection, perpetual duration, and the option to issue stock to its owners, known as shareholders.
Corporations are robust legal entities, but it’s essential to know that you may be subject to what is known as “double taxation” when you’re taxed on your business income twice, first on your business tax return and then on your tax return. That said, small businesses may qualify for an S corporation tax status.
Nonprofit Organization
Suppose you’re starting a charity organization or another business advancing a social cause without expecting financial gain. In that case, you may be eligible to form a nonprofit. A nonprofit is a particular business structure that can qualify for tax-exempt status.
Choosing the proper business structure for your startup is a crucial decision you shouldn’t take lightly. Spend time investigating your options and determining which business type aligns best with your vision.
5. File Business Formation Documents
You need to file important business formation documents to officially register your business with the Texas Secretary of State. Here’s an overview of the formation documents that you’ll need to file depending on your chosen business structure.
Sole Proprietorship
None, but you may consider filing for a DBA to increase business credibility and open a business bank account.
Limited Liability Company (LLC)
File a certificate of formation for a limited liability company with the Texas Secretary of State.
Even though it’s not legally required, you should create an operating agreement to outline your LLC’s rules and procedures.
Corporation
File a certificate of formation for a for-profit corporation with the Texas Secretary of State.
It would be best to create corporate bylaws to outline rules and procedures your corporation will follow; you don’t need to file them with the Secretary of State.
Nonprofit
File a certificate of formation for a nonprofit corporation with the Texas Secretary of State. You’ll also need to create corporate bylaws.
If you’re filing for a Texas LLC or a corporation, The Texas Business Organizations Code “requires every domestic or foreign filing entity to maintain a registered agent and office in Texas.” Your Texas registered agent is responsible for receiving legal notices and important mail for your business.
It’s crucial to fill out your formation paperwork correctly and accurately and follow all appropriate instructions. Even the slightest inconsistencies can cause you to lose liability protection or tax benefits. Swyft Filings can help you form an LLC, a C corp, a DBA, or a nonprofit correctly and swiftly.
6. Apply for Texas Business Licenses and Permits
Your small business will need to obtain business licenses and permits after incorporation. Licensing requirements exist at the federal, state, and local levels, and it’s essential to carefully research what kind of business licenses you need to start operating in Texas.
Texas doesn’t require all businesses to get a general Texas business license. However, depending on your business, you may still need to get an industry-specific license, permit, or registration. Acupuncture, apartment renting, and home moving services are examples of business activities requiring state licenses.[4]
Your startup may also face license and permit requirements at the local level. You may need a general business license or an industry-specific one from your local county or city government. Contact your county clerk or another local authority to get the most accurate information about your local business license requirements.
Figuring out what business licenses and permits you need can quickly become overwhelming. Swyft Filings can research your business's licensing requirements at the federal, state, and local levels and submit your license applications for you. Learn more about how we can help you with your business licenses and research.
7. File and Report Business Taxes
As a business owner, you must pay taxes to the IRS (internal revenue service) and any appropriate state and local authorities.
Most businesses have federal tax obligations. You may also have to pay a state tax or a sales tax, depending on your business structure and the nature of your activities. Texas is one of the five states that doesn’t have a personal income tax.[5] There is, however, a franchise tax. Still, most small businesses can avoid it because it’s based on the company’s revenue.
It would be best if you made filing your business taxes on time a top priority. Delays and missed deadlines can cause severe consequences for your business, so research when and how you need to file your taxes before you start operating in Texas.
8. Open a Business Bank Account
Opening a separate business bank account is critical to protecting your assets. Most banks require an employer identification number (EIN) to open a business account. It’s a tax identification number issued by the IRS. It’s sometimes also called a federal employer identification number, and you can think of it as a social security number for your business.
Business owners will also need an EIN to collect revenue and hire employees. Swyft Filings can help you obtain an EIN with just one button click.
Take Your First Steps Toward Small Business Ownership
Texas is a business-friendly state with a low tax burden and one of the strongest economies in the country. The opportunities for entrepreneurs are endless, and it’s one of the best places to turn your business idea into a successful startup.
To start a business in Texas, you must undergo a business formation process. It involves multiple steps, from drafting a business plan to applying for necessary business licenses and permits.
We’re here to help. Swyft Filings will handle your business formation paperwork so you can focus on doing what you love and growing a successful business. Form your LLC, corporation, or nonprofit in just a few minutes and confidently start operating in Texas.
Your Perfect Fit: Whether you're looking at a simple LLC or a dedicated nonprofit, we'll help you identify the best structure for your dream business.
Continued Support: Your entrepreneurial journey doesn’t stop at formation. Our key management services help ensure your business thrives.
Tailored Affordability: Get value-packed options suited to your business needs, starting at just $0 + state fees.
Frequently Asked Questions
Is Texas a good place to start a business?
Texas has the second largest economy in the country, vibrant cities like Houston and Austin, and low tax burden, which makes it an excellent place to start a small business.
How much does it cost to start operating in Texas?
Startup costs vary from business to business. You’ll need to cover filing fees when you submit your business formation paperwork to the Texas Secretary of State and apply for business licenses.
Can I start a business in Texas without a business plan?
Drafting a business plan before forming a business in Texas is highly recommended. It will help you make better business decisions and, if needed, secure funding from banks or lenders.
What does Texas require to start a business?
It depends on your chosen business structure. For example, becoming a sole proprietor requires business formation paperwork only if you want to file for a DBA. In contrast, you need to file a certificate of formation and draft corporate bylaws to form a corporation.
What is the process for starting a business in Texas?
To form most types of business, you’ll need to file business formation paperwork with the Secretary of State, apply for appropriate business licenses, and open a business bank account.
Why are most LLCs in Delaware?
Delaware is one of the most business-friendly states in the country. It offers significant advantages and flexibility to LLC owners. Learn more about forming an LLC in Delaware.
Bibliography
U.S. Small Business Administration. “Texas Small Business Economic Profile.” Accessed July 15, 2023.
Office of the Texas Governor Greg Abbott. “Target Industry Clusters.” Accessed July 15, 2023.
Texas Secretary of State. “Name Filings FAQs.” Accessed July 15th, 2023.
Office of the Texas Governor Greg Abbott. “Texas Business Licenses and Permits.” Accessed July 15, 2023.
Tax Foundation. “Taxes In Texas.” Accessed July 15, 2023.
business types
Learn more about each type of business
No matter the business type, Swyft Filings can help you form your new company.
